Valix Finacc vol 1 Problem 14-18

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 14-18

  2008

Dec.  1   Put option                                                                             100,000

                        Cash                                                                                                    100,000

  2009

Feb.  1   Cash (50,000 x 180)                                                               9,000,000

                        Sales                                                                                                  9,000,000

         1    Loss on put option                                                                100,000

                        Put option                                                                                           100,000              

       With the price above the put option price, on the part of the

        seller, there is no reason to exercise the option. It is better to

        sell the product on the open market. Thus, the output option

        is not exercised on February 1, 2009 and has no value.